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Chapter 11 PRICING: REVENUE CONTROL. Steve Durham The House Advantage. Terminology: Drop, Payouts, Hold. Drop Money people use for purpose of placing a bet; includes money won from the casino. Also the amount that a player is willing to risk.

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chapter 11 pricing revenue control

Chapter 11PRICING: REVENUE CONTROL

Steve Durham

The House Advantage

terminology drop payouts hold
Terminology: Drop, Payouts, Hold
  • Drop
  • Money people use for purpose of placing a bet; includes money won from the casino.
  • Also the amount that a player is willing to risk.
  • Historically, money spent to gamble was “dropped” into some sort of collection container.
  • Today money is placed in a “drop box.”
  • Other terms for the drop: Write (Keno), Handle (Sportsbook), Take (Bingo )
slide3
Payouts
  • Money paid for winning wagers, becomes part of payouts.
  • Occasionally called a “paid out.”
  • Win / Hold
  • Interchangeable terms for money casino “holds” onto after gaming ceases.
  • Difference between Drop (money wagered) and Payouts (money paid for winning wagers):

Win/Hold = Drop - Payouts

paper trail of revenue
Paper Trail of Revenue
  • Sportsbook department – each dollar

bet is logged; all actual bet activity is accounted for.

    • Customer places a bet
    • Employee inputs information into computer
    • Ticket is issued for transaction
    • Receipt officially recorded when transaction is registered in the computer
    • Employee must balance hard copies with computer receipt at end of shift
    • Hard copies and computer-stored information constitute the revenue in the gaming centers
  • Bingo, Keno – like sportsbook, managers know all activity that occurred in their departments during a specific period of time.
slide5
Table Games
  • Approximately track drops and payouts
    • Not every transaction is recorded
    • No digital record or hard copy of each transaction exists
  • Customer exchanges currency for chips
    • Dealer follows specific procedure exactly
    • Displays dollar and chip transaction for surveillance
    • Calls out bill size for Pit Supervisor
  • Currency
    • Dropped into drop box following specific procedure
    • Drop box is collected by security and drop team
    • Taken to vault
    • Opened and contents counted as revenue for table
slide6
Electronic Gaming Devices
  • Each transaction is recorded by a computer chip in the machine.
  • Computer chip transmits data to mainframe.
  • Coin
    • Goes into drop box in the bottom of the machine.
    • Drop box is collected by security and drop team.
    • Taken to vault.
    • Opened and contents counted as revenue for machine.
  • When drop is counted, total is compared to computer record.
paper trail of paid outs
Paper Trail of Paid Outs
  • Table Games
  • Approximate measure using fills
    • Order form to request more chips for a specific table
    • Used to represent the paid outs
  • Pit Supervisor
    • Examines rack
    • Determines how much of each denomination is needed
    • Completes a “fill slip” on computer
    • Fill request is transmitted to Cage
slide8
Table Games(cont’d)
  • Cashier
    • Places fill slip face up so surveillance can see
    • Fills the order
    • Security also counts amount of chips
    • Cashier keeps copy
    • Security takes fill slip copies and chips to pit
  • Dealer
    • Security waits for end of hand
    • Dealer verifies fill amounts
    • Dealer signs fill slip,
    • Dealer transfers chips to rack, and drops fill slip
    • Security and Pit Supervisor observe entire transaction
cage operations
Cage Operations
  • Responsible for the control of money
    • Maintains inventory of cash and equivalents
    • Four areas: cashier cages, soft count room, hard count room, vault
    • Each area has a manager who reports to Controller (or similar position)
  • Cashier Cage
    • Acts as a bank for guests
    • Exchange currency, chips, coins, electronic gaming tickets; cash checks
slide10
Drop Team
    • Consists of cage employees and a security guard
    • Collect table game drop boxes and electronic gaming device buckets; replace bill validators on casino floor
  • Hard Count and Soft Count Rooms
    • Soft count room inventories paper money; hard count room inventories coins and chips
    • Each has a different employees to count the cash or cash equivalents
    • Drop boxes opened individually, one at a time.
    • Money is transferred to the vault, which prepares the banks for employees
controls in place
Controls in Place
  • Signatures
    • Provide a traceable line of responsibility
    • Assures employees are not accused of theft if the funds disappear
  • Separation of Duties
    • Each person has specific responsibilities
  • Multiple Employee Involvement
    • More than one person involved in transaction
      • Lessens likelihood of theft or collusion
    • Surveillance
      • Observe transactions via cameras in ceiling
      • Digital record created
slide12
Duplicate / Triplicate Forms
    • Verify the transfer of responsibility
    • Confirm the exact description of the funds
  • Cash Countdowns
    • Party receiving funds counts down the amount
    • Both parties confirm by signing
  • Digital Trail
    • Provides a trail that should match the paper trail being created simultaneously
    • Hard copies can be “lost;” digital trail discourages temptation to steal or embezzle
slide13
Man Trap
  • Small anteroom in the vault or count rooms
  • Door must be closed and locked before door into the secure area can be unlocked and opened.
  • Entry and man trap are heavily covered with surveillance cameras, constantly monitored.
  • Supervisory Oversight
  • This is essential to control

- Pit supervisor watches dealer; cage supervisor watches cashier; drop team lead watches drop team

- Supervisors watch to be sure employees strictly follow all procedures relating to cash handling

- Monitor employee behavior toward customers and other employees

hold percentage
Hold Percentage
  • Hold Percentage = Hold ÷ Drop
  • Varies from period to period
  • Constant over long term (many trials)
  • Variation by Drop Period
  • Pit managers look at hold percentage by individual gaming table to be sure controls are effective.
  • When the percentages are not what are expected, it is often hard to say whether someone is stealing or if there is just a natural, statistical variation.
finances
Finances
  • Access to Capital
  • Early Nevada operations utilized profits to purchase additional table games or slots
  • New entrants into market were self-funded
  • Organized crime
    • Funds from illegal activities
    • Funds from labor union pension funds
  • Nevada law changed, allowing licensing of corporations; opened equity and debt markets
  • Bill Harrah
  • Listed on the New York Stock Exchange
  • Other sole proprietors followed
slide16
Public Perception
    • External financing allowed expansion, new development.
    • Greater availability brought more acceptance and funds from public markets.
  • Future access to capital depends on four factors:
    • Success of individual companies and industry as a whole
    • Continued stability in legality of gaming
    • Tight regulation of industry
    • Continued social acceptance of gaming as entertainment
financing expansion equity vs debt
Financing Expansion: Equity vs. Debt
  • Equity
  • Allows greater financial flexibility
  • Gives up some control, dilutes partners/owners percentages by increasing number of owners
  • Equity partners expect continual dividends
  • Debt
  • A fixed payment; comes to an end
  • Primary control vs. stockholders
  • Interest portion is expense deducted from profits
pricing
Pricing
  • Pricing – represented by the house advantage; the price the player is charged to play
  • Fairness – responsibility of regulators, operators
  • Management needs to:
  • Offer the right price mix to attract and maintain guests without taking unfair advantage
  • Find a balance that allows player to extend time played, enjoy their experience, and permit casino to make a profit
  • Regulations allow for a broad range of payback percentages, allowing the casino to fluctuate house advantages throughout the casino floor.
casino comps and player ratings
Casino Comps and Player Ratings
  • Complimentary – something given free, or as a gift; often known as a “comp.”
  • A casino comp strives to maintain a balance between profit and customer reward.
  • History
  • Offered to known guests with little research
  • Method was inconsistent, unprofitable, unreliable
  • Casinos realized importance of analyzing player’s betting, determining their worth for comps
  • Now, floor supervisor is responsible to examine play of every qualified player
slide21
Player Ratings
  • Process by which a table game floor supervisor monitors the gambling routine of a patron.
  • A gaming device monitors a player’s action through a computerized rating system.
  • Data produced determines value of a player.
  • Table Game Ratings
  • Once required betting limit is met, supervisor asks if guest cares to be rated.
  • At conclusion of play, floor supervisor closes out rating, calculates average bet, records time played, total amount in/out, and the win or loss.
slide22
Casino Expected Win / Theoretical Win
  • Average bet and length of play – important aspect of player rating.
  • Data used to determine player’s worth by calculating theoretical win, determining comps the casino can offer.
  • Theoretical win – expected win by casino throughout a length of play. The longer the session, the closer actual win is to the theoretical win.
  • The Central Limit Theorem states that over a large number of independent trials, the casino will see a normal probability distribution.

THEORETICAL WIN = HOUSE ADVANTAGE x GAME PACE x AVERAGE BET x DURATION

slide23
Computerized Systems
  • Designed to provide constant source of information; accessed for review at any time.
  • Digital ratings on every table game; player’s card swiped to generate accurate ratings.
  • Future of comps will rely greatly on advancement of technology.
  • Interested in players self-comping, possibly through a computerized kiosk system
  • Casinos must find a balance between the use of too much technology and personal attention.
slide24
Challenges and Concerns
  • Casinos must rely on tremendous amounts of labor for evaluating and inputting the data necessary for a casino to administer comps.
  • Customers may also experience frustration if they are new to a gaming property.
  • An unknown player to the casino who asks for a complimentary may be placed on a qualifying basis status.
  • Casinos must be cautious when requesting information from a player.
slide25
Advantage Players
  • Individuals with sophisticated skill levels that reduce, and sometimes eliminate, the house advantage by exploiting certain opportunities.
  • Some request to not be rated, they value their anonymity and longevity more than receiving comps.
  • Managers must be familiar with a normal theoretical expectation of all games, and recognize when a player’s action falls outside the normal standard deviation.
  • The standard deviation tells how much deviation can be expected when large numbers of independent trials (wagers) are experienced.
slide26
Human Error
  • Errors in ratings create inconsistencies, which result in disagreements with players.
  • False Ratings
  • Consist of a rating that represents a gambling session that never took place.
  • Created to generate artificial theoretical win, gain comps without having to gamble.
  • Can be entered with relative ease because of the large number of rated players an employee is responsible for, therefore allowing the false rating to go unnoticed.
slide27
Inflated Ratings
  • Actually took place, but reveals larger average bets and longer time played than actual.
  • Very difficult to monitor and prevent.
  • Guests are sometimes very generous, offering their comps to other guests or employees.
  • Extremely difficult to identify due to the sheer volume of players and comps distributed.
  • Vital to the success of a gaming company to identify their market and adjust the complimentary system to fit their specific region.
slide28
Slot Ratings
  • Slots encourage higher gross handles (total amount wagered), volumes of players, lower costs, and less risk than table games.
  • Data tracking system out-performs all data collection efforts in table games.
  • Technology allows vital performance data to be collected from slots while tracking pertinent player information for the marketing department.
  • Each guest is evaluated for the potential value they bring to the casino.
  • For a guest to be rated on a slot machine, the guest must place his or her card in the slot designated for player tracking.
slide29
Player’s Group
  • Early 1980s – slot clubs (and later, table games) began to reward players for frequently visiting the casino.
  • Includes all players who sign up to have their play tracked and evaluated through table games or slots to receive promotions, rebates, comps.
  • Strength of casino is how well they manage the database of players they have created.
  • Casinos must continue to reinvent the way they present themselves to the customer and how they respond to their needs.
casino credit
Casino Credit
  • Closely associated and coordinated with the complimentary systems that casinos use to attract players to the property.
  • Types of Credit
  • Most common – casino-issued counter check, or marker.
  • Rim card – document used on table game to track credit transactions of a high roller who requests multiple credit transactions; eliminates need for player to sign multiple documents throughout session.
slide31
Credit Process
  • Player fills out a credit application.
  • Amount of credit is requested; casino credit department reviews application.
  • Customer must sign a signature card; represents legal signature.
  • Guest with established credit line is the only person eligible to use the account.
  • Amount is determined by evaluating many different factors: amount of credit already established at other casinos, guest’s credit score, bank balances, past delinquent accounts.
slide32
Credit Distribution
  • Floor supervisor verifies player has credit available before dealer is instructed to distribute amount.
  • Player signs marker; given to the pit clerk to match the signature against a digital signature.
  • If the signature matches, marker is filed.
  • Floor supervisor and dealer must also initial portion of the marker with player’s name, amount, table number, and time the marker was generated.
  • Slip is put in drop box on the game. Supervisor and dealer also sign table card and put it back on the game table, concluding issuance of the marker.
slide33
Credit Extension
  • A casino marketing executive must first evaluate how the player lost the credit line.
  • The credit extension is coded as a TTO, meaning “this trip only.”
  • Casino hosts are able to grant or extend credit to a guest if they are authorized to do so.
  • It is the responsibility of the marketing executive to determine whether the player is fit to continue or should refrain from gambling for a moment to reevaluate his or her situation.
slide34
Credit Hold
  • Casino can require guest to use casino credit only after front money or winnings are exhausted.
  • Long periods of time between visits require a player check-in and new signature card to release the hold on the account.
  • A player may also have bad debt from slow pay or no pay from previous trips.
  • If players attempt to obtain credit and use the money for non-gaming related activities.
  • If a patron cashes out an entire credit line with one marker.
slide35
Collections
  • Credit department must evaluate how and when they will attempt to collect a gambling debt.
  • Applicant can designate payment when application is completed.
  • Statement may be sent requesting payment in 30 days, or pay at the conclusion of stay.
  • Third-party collection service may be used.
  • May offer special arrangements for guests who have difficulty paying debts.
  • The “write-off” must be presented and approved by the executive level; at that time debt can be considered irretrievable, or written off.
effective player rating systems
Effective Player Rating Systems
  • The importance of Player Rating Systems
    • Issuance of complimentaries
    • Identify customers for marketing purposes
  • Establishing Guidelines
    • Ensure acceptable casino profit margin
    • Maximize customer satisfaction
  • Actual versus Theoretical Win
    • Theoretical=best indicator of casino gain
      • Avg. bet * hours played * decisions/hr * house edge
      • $150*2.25 hours*60*5.26% = $1,065.15
    • Actual=may indicate future player revenues
effective player rating systems37
Effective Player Rating Systems
  • Measurement (supervisory estimates)
    • Game played
      • e.g. Blackjack
    • Player’s average bet
      • e.g. $150
    • Player’s skill level
      • Soft=1.00; Avg.=0.60; Hard=0.20
    • Speed of the game
      • Slow=60; Medium=80; Fast=120
effective player rating systems38
Effective Player Rating Systems
  • Measurement Example #1

Game HousePlayer MultipliersGame Speed

Adv.Soft Avg. HardSlow Med Fast

BJack 2.5% 1.00 0.60 0.20 60 80 120

$150*2.5%*0.60*80*4(hours)

= $720 (theoretical win)

effective player rating systems39
Effective Player Rating Systems
  • Measurement Example #2

Game HousePlayer MultipliersGame Speed

Adv.Soft Avg. HardSlow Med Fast

Roul 5.26% n/a 1.00 0.51 60 80 120

$150*5.26%*1.00*60*4(hours)

= $1,893.60 (theoretical win)

effective player rating systems40
Effective Player Rating Systems
  • Measurement Example #3

Game HousePlayer MultipliersGame Speed

Adv.Soft Avg. HardSlow Med Fast

Dice 1.00% 3.14 1.68 0.606 60 80 120

$150*1.00%*1.68*80*4(hours)

= $806.40 (theoretical win)

effective player rating systems41
Effective Player Rating Systems
  • BlackJack win = $720
    • Profit margin = 15-20%
      • Net value = $144
  • Roulette win = $1,894
    • Profit margin = 15-20%
      • Net value = $331
  • Dice win = $806
    • Profit margin = 15-20%
      • Net value = $141

What comps would you give this player tonite?

effective player rating systems42
Effective Player Rating Systems
  • Tier 1 = minimum $20,000 credit
    • Premium players
  • Tier 2 = $100,000 - $500,000
    • “Heavy Hitters”
  • Tier 3 = $1,000,000 - $5,000,000
    • “Whales”
  • Categories not all-inclusive
slot systems
Slot Systems
  • Track data on two levels
    • Machine usage (automated)
    • Marketing module
      • Player performance
      • Demographics
      • Visitation
      • Gaming history
  • Info gained through player enrollment
      • Convince players to use tracking cards
        • Reward systems offered
table game hold
Table Game Hold
  • Win/drop = hold
  • Typical usage
    • Identify good or bad casino management
    • Identify theft
table game hold45
Table Game Hold
  • Table utilization

Table 1 Table 2

Players per table 1 7

Drop per player $100 $100

Total drop $100 $700

Bet per hand/player $10 $10

Total bet per hand $10 $70

House advantage 1% 1%

Hands per hour 209 52

Win per hour $20.90 $36.40

Hold per hour 20.9% 5.2%

players per table decisions hour
Players per Table & Decisions/Hour

No. of Players 21 Hands per Hour

1 209

2 139

3 105

4 84

5 70

6 60

7 52

players per table decisions hour47
Players per Table & Decisions/Hour

No. of Players Roulette Spins per Hour

1 112

2 76

3 60

4 55

5 48

6 35

players per table decisions hour48
Players per Table & Decisions/Hour

No. of Players Dice Tosses per Hour

1 249

3 216

5 144

7 135

9 123

11 102

labor per table
Labor Per Table
  • Assume:
    • dealer works 60 minutes on & 20 min off
    • 1 floorperson per 4 games (0.25 per game); breaks/lunch
    • Dealer paid $50 for 8-hour shift
    • Floorperson paid $150 per shift
    • Taxes and benefits, add 30%

Dealer: 80/60 x $50 x 1.30 = $86.67

Floorperson: 480/380 x 0.25 x $150 x 1.30 = $61.58

Total labor per table per shift = $148.25

(or $18.53/hour)

labor per table50
Labor Per Table

Minimum Break-Even Bets

# of Players 21 Hands/Hour Minimum Bet

1 209 $9.46

2 139 $7.11

3 105 $6.27

4 84 $5.88

5 70 $5.65

6 60 $5.49

7 58 $5.43

slot systems51
Slot Systems
  • Card Use Issue
    • Las Vegas Strip usage rate: 30-35%
      • Estimate 1% increase = $20m gain in EBITDA
        • Onus of remembering to use cards
        • Do not believe length of stay is sufficient
    • Random bonus plan addresses each
        • Not frequent or extended stay-based
        • Selects from active player set
        • Allows instant public celebration of winner
        • Provides visible evidence of winning
        • Creates feeling of excitement and anticipation
casino marketing
Casino Marketing
  • Match Plays and Non-negotiables
  • Problems and Solutions
  • Gambler’s Spree (Junket)
  • Slot Marketing and Consumer Choice Factors
  • Rebates on Losses
  • Table Game Rule Modifications as a Marketing Tool
match plays and non negotiables
Match Plays and Non-negotiables
  • Match Plays
    • Requires cash ‘match’ of bet
    • May not be an even money amount
      • e.g. $2 cash for $1 match play; $3 payout
  • Non-negotiable
    • Can be bet by itself
  • Can be styled so that forfeited when:
    • The player loses the bet
    • When the player wins the bet by exchanging it for a live chip of equal value
      • If coupons placed in drop box: with exchange
      • Forfeited only on losing bets: without exchange
match plays and non negotiables54
Match Plays and Non-negotiables
  • Value Example

Ask: How much would the player have to bet in order to create the same effect?

    • Betting $5 ‘with exchange’ match with $5 cash
      • Leaves the game with $15 if bet is won
        • $5 bet plus $10 payoff
        • On an even money bet, player would have wagered $7.50
        • Thus coupon has a value of $2.50
        • Factor in house edge of 1.5%; coupon cost=$2.4625; + house earns $0.075
        • Accompanying bet of $164 needed to cover this cost
    • Betting $5 ‘with exchange’ nonnegotiable
      • Leaves game with $5 if bet is won
        • No personal money bet
        • On an even money bet, player would have wagered $2.50
        • Thus coupon has a value of $2.50
        • Factor in house edge of 1.5%; house cost reduced to $2.3875
        • Accompanying bet of $313.67 needed to cover this cost
gambler s spree junket
Gambler’s Spree (Junket)
  • Attract players to casino
    • Designed by independent casino representatives
      • Negotiate with casino-hotel for discounted room rates, F&B credit and some form of match play or nonnegotiable chip bonus
      • Adds transportation and transfers
      • Sells package to players at a price to generate a profit of $60 - $100 per player
gambler s spree junket56
Gambler’s Spree (Junket)
  • Example
    • Package includes 2-night, 3-day hotel, airfare, free drinks and a 50% disc on coffee shop charges
    • Given $50 in match play ‘with exchange’ coupons. If bets $5 for 8-hours, then receives add’l $100 cash & $150 match
    • Player gives score card to table games so average bet and time played is recorded
gambler s spree junket57
Gambler’s Spree (Junket)
  • Casino should ask:
    • What is profit/loss if only minimum is met?
    • What minimum is required for breakeven?
    • Is it reasonable to expect add’l play?
    • Are there others reasons to offer this plan even if it will not breakeven?
gambler s spree junket58
Gambler’s Spree (Junket)
  • Example assumes:
    • Casino edge of 1.5%
    • Player stays for 2 nights
    • Hotel could sold for $5/more/night
    • House wins one average bet per hour
    • Player will eat $60 in meals; $30 discount
gambler s spree junket59
Gambler’s Spree (Junket)

Hours played 8 8 10 12

Average bet $5 $25 $25 $25

$50 Match Play cost -24.63 -24.63 -24.63 -24.63

Win @ hours/bet +40 +200 +250 +300

$100 cash award -100 -100 -100 -100

Add’l $150 match play -73.88 -73.88 -73.88 -73.88

Discount on meals -30 -30 -30 -30

Loss on room discount -10 -10 -10 -10

Loss/gain before taxes -198.50 -38.50 +11.50 +61.50

Gaming tax (6.25%) -2.50 -12.50 -15.63 -18.75

Loss/gain before labor -201 -51 -4.13 +42.75

Operations labor @ 3.53/hr -28.27 -28.27 -28.27 -28.27

Net Loss/Gain -229.24 -79.24 -39.43 +00.39

gambler s spree junket60
Gambler’s Spree (Junket)
  • Casino should ask:
    • What is profit/loss if only minimum is met?
      • -$229.24
    • What minimum is required for breakeven?
      • Average bet of $25; play for 12 hours
    • Is it reasonable to expect add’l play?
      • Average bet is 5 times program design
      • Time is 50% longer than minimum
    • Are there others reasons to offer this plan even if it will not breakeven?
      • Subjective
gambler s spree junket61
Gambler’s Spree (Junket)
  • Casino should ask (continued):
    • Are there others reasons to offer this plan even if it will not breakeven?
      • Yes: Initial introduction to the casino so players likely to return on their own at no casino cost
      • No: Bargain hunters tend not to be brand loyal
      • Yes: May be worth ‘taking a shot’
      • Yes: Competitors offering same or similar
gambler s spree junket62
Gambler’s Spree (Junket)
  • Summary
    • Don’t accept a program simply because a competitor is doing it
    • Don’t accept a program unless the anticipated results can be quantified
    • Separate the hyperbole from the facts
    • Beware of any program for which doubts are put to rest only by saying :Trust me, you’ll make a profit.”
slot marketing consumer choice factors
Slot Marketing & Consumer Choice Factors
  • Slot marketing
    • Database driven
      • Drive overall business volume
      • Increase slot club enrollment
      • Establish and build relationships
      • Build loyalty
        • Drawing based promotions with cash prizes
        • Cash mail or direct mail programs
          • Tiered offers in the form of cash incentives
          • Based upon Average Daily Theoretical (ADT)
          • Goal to generate additional visits
          • May create sense of entitlement
slot marketing consumer choice factors64
Slot Marketing & Consumer Choice Factors
  • Restaurants
    • Can be used to generate slot play
      • Evidence is mixed
  • Food loss leaders
    • Does restaurant volume drive casino volume?
slot marketing consumer choice factors65
Slot Marketing & Consumer Choice Factors
  • Drawing-based Promotions
    • Popular in repeater markets
    • Multi-week time frame
    • Chances of winning increase with amount of play during qualifying periods
    • Infinite number of variations
    • Example:
      • Customers win drawing tickets for jackpots
      • Selected days, drawings are held
      • Incremental effect on casino cash flows?
slot marketing consumer choice factors66
Slot Marketing & Consumer Choice Factors
  • Goal is to:
    • Customer acquisition
      • Mass mailings
      • Appending databases
    • Customer retention
      • Targeted direct mail campaigns
      • Randon bonus promotions; special events
    • Customer recovery
      • Customer interviews designed to discover
        • Service delivery problems
        • Lapses in patronage or other dissatisfaction
slot marketing consumer choice factors67
Slot Marketing & Consumer Choice Factors
  • Choice factors (property attributes)
    • Will vary by market and culture
    • General convenience of location is only consistent factor
    • Other top factors
      • Favorite place to play
      • You feel safe there
      • Employees are friendly and courteous
      • A good place to take out-of-town guests
      • Availability of games
rebates on losses
Rebates on Losses
  • Rebates to premium players
    • Will receive a discount of x percent when incurring a loss
      • Example: If 10% discount, player only needs to repay 90% of her losses while still receiving 100% of the amounts won
      • Rumored that larger casinos offer up to 25% to a few of the biggest bettors
      • Only when the theoretical casino win equals the player’s actual loss does a 10% loss rebate actually cost the casino 10%
table game rule modifications as a marketing tool
Table Game Rule Modifications as a Marketing Tool
  • Marketing executives sometimes use rule modifications to win customers and increase profits
    • A decrease in house advantage results in a decrease in hold
  • To be successful
    • Players must view rule variation as favorable (beneficial)
    • Play volume must increase to compensate for the decrease in house advantage
the premium player
The Premium Player
  • Higher Acquisition Cost of the Premium Player
    • Players successful at negotiating more perks
      • Hotel
      • Food and Beverage
      • Occasional airfare
    • Increased use of discounts on losses
  • Discounting
    • Impact upon profits
    • Requires longer time of play
    • Prevent pooling losses across games
    • Be aware of fixed and variable cost structure
effective player rating systems71
Effective Player Rating Systems
  • Tier 1 = minimum $20,000 credit
    • Premium players
  • Tier 2 = $100,000 - $500,000
    • “Heavy Hitters”
  • Tier 3 = $1,000,000 - $5,000,000
    • “Whales”
  • Categories not all-inclusive